(Bloomberg) — The stock market saw another down day, with Treasury yields climbing amid hawkish remarks from Federal Reserve officials and swaps pricing in a 5% peak policy rate in 2023. The pound wavered after Liz Truss resigned as UK prime minister.
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A rally in the S&P 500 fizzled out after Philadelphia Fed chief Patrick Harker said policymakers are likely to raise rates to “well above” 4% this year and hold them at restrictive level — while leaving the door open to doing more if needed. Fed Governor Lisa Cook also spoke, noting that rates will need to keep rising to get inflation under control. The current rate sits between 3% and 3.25%.
“Stocks are not out of the woods yet,” said Fawad Razaqzada, market analyst at City Index and Forex.com. “Fears over further tightening of central bank policy amid an environment of high-inflation and low-growth means investors will avoid buying stocks aggressively. Even at these relatively-inexpensive levels.”
Traders also scoured a mixed bag of quarterly results, with Tesla Inc.’s sales disappointing and International Business Machines Corp. topping forecasts. Several market observers said the bar has been lowered quite a bit ahead of the earnings season, boosting the odds of upside surprises. It’s also worth noting that there’s been no shortage of warning signals about the economy from the corporate side.
Alcoa Corp., for instance, joined a rebound in metals. But its quarterly loss signaled a worsening environment for a company that last month warned investors it was being squeezed by higher costs and falling aluminum prices. And that’s a dependable barometer of the health of sectors including construction, automotive, aerospace and consumer packaging.
Another worrisome signal came from Union Pacific Corp., the largest US freight railroad, which cut its forecast for volume growth to reflect a “challenging year.”
As traders wade through corporate results, “with an extra eye on guidance, expect volatility to remain elevated,” said Mike Loewengart at Morgan Stanley Global Investment Office.
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.9% as of 2:40 p.m. New York time
The Nasdaq 100 fell 0.7%
The Dow Jones Industrial Average fell 0.3%
The MSCI World index fell 0.6%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro rose 0.1% to $0.9785
The British pound rose 0.1% to $1.1231
The Japanese yen fell 0.1% to 150.08 per dollar
Cryptocurrencies
Bitcoin fell 0.9% to $19,032.81
Ether fell 0.7% to $1,285.58
Bonds
The yield on 10-year Treasuries advanced eight basis points to 4.21%
Germany’s 10-year yield advanced three basis points to 2.40%
Britain’s 10-year yield advanced three basis points to 3.91%
Commodities
–With assistance from Vildana Hajric and Peyton Forte.
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